Okay, not a bad partner, but a bad credit partner. This is a not-so-uncommon occurrence when two people decide they want to buy a house together and apply for a mortgage. Good cop, bad cop. Good credit, bad credit. What happens when one borrower's credit score is 500 and the other borrower's score is 800?
The borrowers might first hope that they use the highest score. Unfortunately, that won't happen. Maybe they hope they'll average them together, after all, that's how lenders use income when qualifying a borrower, right? That would give a score of 650. Not the highest of scores but still acceptable by mortgage lenders.
Again, no. Won't happen.
When there are two borrower's on a mortgage application, regardless of the disparity, the lender will use the lower of the two scores. For example, if the two scores are 800 and 750, the lender will use 750 as the qualifying score. Or if the scores were 740 and 625, the lender uses 625. In this example where one score is 800 and the lower score is 500, the lender will use 500. Way below acceptable credit scoring range. What to do?
The only option is to take the person with the bad credit score off of the mortgage application entirely. Leave them off. Don't use them. Lenders will accept this approach as long as the remaining borrower can qualify from an income and debt perspective on their own. If the wife is the breadwinner and she makes $10,000 as an attorney and the husband is a stay-at-home dad, then in all likelihood the loan will be approved as all income is coming from one person.
This approach will not work if the income needed from the borrower with low scores is needed in order to qualify. But if income is sufficient to qualify, then the deal can close.
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